By: Salvatore Marino, Vice President of Business Development, CargoNet March 31, 2015

Drop a pebble into a fishpond and it creates a tiny ripple. What starts as a local event instantly surges outward, causing a ring of disturbance that grows as it travels across the water. Beneath the surface, the goldfish scatter as a mallard above beats a rapid retreat. And for those who may be dozing on the shoreline, a chain of events has begun that forces change in every direction.

Cargo theft detonates a similar wave of disruption in the supply chain. After a theft takes place, the toll in damages is just beginning, and direct losses from the theft often trigger other, indirect impacts that travel down the supply chain - call it the ripple effect. A study in 2011 was conducted around a stolen container carrying digital cameras with an estimated value of $200,000. It found that ripple-effect losses actually dwarfed the direct loss of cameras by a factor of 10, meaning it would take an additional $2m in sales to offset the initial loss.

Those sales have to compensate for expedited shipping of replacement products, repayment of taxes and duties, and loss of consumer confidence, among other concerns. For any company - in any field - that’s quite a ripple.

Truth or Consequences

According to the Federal Bureau of Investigation, losses from cargo theft in the United States could reach $30bn annually, although there’s little objective evidence available to support that figure. Willful blindness may be partly to blame for the absence, and many companies fail to report thefts in order to avoid public scrutiny or higher insurance premiums. In addition, reporting systems used by law enforcement, such as the National Crime Information Center (NCIC), lack an appropriate uniform crime report (UCR) code to label cargo theft, which leaves investigators with a tricky judgment call. When reporting a theft, the choices include robbery, extortion/blackmail, burglary/breaking and entering, theft from building, theft from motor vehicle, all other larceny, motor vehicle theft, false pretenses/swindle/confidence game, credit card/automated teller machine fraud, impersonation, wire fraud, embezzlement, and bribery. This subjective and potentially confusing reporting process hinders the filing officer’s ability to match a crime to the appropriate code.

Reporting issues present just one black hole when it comes to recovery of stolen cargo. Another prevailing problem is the lack of preparedness by a long and snaking supply chain that includes carriers, brokers, drivers, retailers and manufacturers. All too often, when theft occurs, the victims rely solely on local law enforcement to recover their cargo. Without robust, timely, and actionable intelligence about theft, law enforcement holds a losing hand. In some jurisdictions, investigators lack manpower, resources and basic tools to connect the dots in a cargo theft at the national level.

A cargo theft is typically reported by the driver, since drivers are more often than not the first to notice a loss. The first call is likely to 9-1-1 or a company dispatch center, which in turn will call 9-1-1. The local law enforcement dispatcher deploys an officer to the scene to investigate and take a police report. Usually, the driver doesn’t have complete details but assures the officer it was a “white trailer.” Even for seasoned investigators, it might be challenging to find a missing white trailer among hundreds of other white trailers rumbling down the freeway.

In other cases, details reported to law enforcement are specific to tractor and trailer, such as a vehicle’s identification and license numbers, make, model, color and a rough description of the cargo. Key evidence is often absent — serial numbers, lot numbers, stock-keeping unit numbers, unique markings on packaging and other critical aspects of the missing cargo. This poses another challenge because it’s not entered into NCIC, again due to the lack of law enforcement resources. No question about it, it is time-consuming to enter cargo specifics into the NCIC database, and only a highly motivated researcher will take the time to chase down a victim for this type of gritty detail. The tragedy is that, even when law enforcement discovers suspect cargo, investigators are unable to match cargo in question to what was reported stolen.

Theft Database: Why Not Share?

So, it follows that another challenge is lack of collaboration throughout the supply chain. Victims are generally hesitant to report thefts for fear that their clients, prospects, competitors and insurers will find out. But what if supply chain participants shared theft intelligence and reports of suspicious activity? How might collaboration improve decision making? When a trend is identified and shared, it carries the potential to alert others and lessen their chances of becoming a victim. Sharing information applies not only to the supply chain; it applies equally to law enforcement. Often, several law enforcement agencies investigate the same theft and aren’t even aware of it. If they knew, they might be able to assist each other in the investigation. Having a central reporting repository to reach effectively across jurisdictions should improve and streamline the flow of communications.

In the final analysis, many providers of transportation services have limited resources and are unable to justify the return on investment in maintaining a full-scale security department. Too often, companies don’t appoint a dedicated security person, with the responsibility instead falling to a safety manager, claims manager, operations person, or any warm body in between. It’s far from ideal to have someone responsible for a cargo security program who’s had no prior training. Therefore, it’s imperative to put in place training and educational programs that encourage risk awareness as it specifically relates to cargo theft.

Everyone is responsible for cargo security, and it is in the supply chain’s best interest to share and collaborate, as well as develop best practices, standard operating procedures, and documented protocols. If a shipper asks a transportation provider about post-theft recovery, and the company responds, “We call 9-1-1, file a police report, and submit an insurance claim,” then it may be time to find a new provider.

A thoughtful strategy that addresses the issues faced by law enforcement and the supply chain, combined with a shared willingness to fill these voids, can only lead to recoveries, arrests, and convictions — and a more secure chain with fewer disruptions. When a single container goes missing at any stage of the supply chain, a plan should be in hand and staff at the ready to mop up from cargo theft’s inevitable ripple effects.